Managing services 152304 weekly notes PDF

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152 Managing ServicesWeekly Notes Week 1: Introduction to Service Operations ........................................................................................ Contents What is a service?..............................................................................................................

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152.304 Managing Services Weekly Notes

Contents Week 1: Introduction to Service Operations........................................................................................3 What is a service?..............................................................................................................................3 Simple service process diagram:........................................................................................................3 Good or Bad Service:.........................................................................................................................4 Service Roles in the Economy............................................................................................................4 Service as Part of the Experience Economy.......................................................................................4 Service Type.......................................................................................................................................5 Types of Process................................................................................................................................6 Summary...........................................................................................................................................8 What are services?........................................................................................................................8 What is ‘service’?...........................................................................................................................8 What is service operations management?.....................................................................................8 Why is service operations management important?.....................................................................8 Week 2: The World of Service...............................................................................................................9 Overview...........................................................................................................................................9 Challenges of Service Management...................................................................................................9 Unique Characteristics of Services...................................................................................................10 Summary.........................................................................................................................................10 What are the key strategic challenges faced by service operations managers?...........................10 What are the key tactical challenges faced by service operations managers?.............................10 What are the challenges for different types of services?.............................................................10 The key challenges are:................................................................................................................11 What are the challenges for different types of process?.............................................................11 A key challenge for service operations managers is.....................................................................11 What are the challenges in working with other management functions?...................................11 Week 3:...............................................................................................................................................12 What is service strategy?.................................................................................................................12 1.

Reflect the overall strategic aims of the business................................................................12

2.

Satisfy the requirements of the market(s) that the business serves....................................13

3.

Consider the practicalities of how a service can be delivered..............................................13

4.

Develop the capabilities of the organisation’s service resources and processes..................13

Defining a service strategy...............................................................................................................14 Why is it important to have a service strategy?...............................................................................15 The process of service strategy formulation....................................................................................15 The six elements of service strategy................................................................................................15 1. Overall business objectives......................................................................................................16 2. Market environment................................................................................................................16 3. Service positioning...................................................................................................................17 4. Service concept.......................................................................................................................17 5. Performance objectives...........................................................................................................18 6. Service resources and processes..............................................................................................18 Putting together strategy is an iterative and continuous process................................................19 How can service provide a competitive advantage?........................................................................19 Competing on ‘product’ or experience........................................................................................20 The 5 positions are:.....................................................................................................................20 Moving to ‘world-class’ service – Chase and Hayes’ four-stage model............................................21 Stage 1: Available for service.......................................................................................................22 Stage 2: Journeyman....................................................................................................................22 Stage 3: Distinctive competence..................................................................................................22 Stage 4: World-class service delivery...........................................................................................22

Week 1: Introduction to Service Operations What is a service? Here is the textbook definition of a service: “While a product is a thing, a service is an activity – a process or set of steps – which involves the treatment of a customer (or user) or something belonging to them, where the customer is also involved, and performs some role, in the service process (also called the service delivery process).” (Johnston, Clark and Shulver, 2012, p. 6).

Simple service process diagram:

A service manager manages this change from state A to state B. They do this by implementing inputs that achieve an outcome. A major part of the managers job is to see the service from the customers point of view and to manage the inputs.

The biggest challenge of service management is Inside Out / Outside in Perspective: the manager needs to balance maintaining both the Manager POV and the Customer POV (think like a manager and a customer at the same time).

Good or Bad Service: Good service results in satisfactory experiences and delivers the ‘triple bottom line’ of service, i.e. better for the customer; better for the staff; better for the organisation. Bad service delivery results in unsatisfied and unhappy customers and delivers the opposite triple bottom line outcomes – poor outcomes for staff, customers, and the organisation.

Service Roles in the Economy The economy can be divided into four sectors. Traditionally these sectors have been the primary, secondary, and tertiary sectors. Now we also have the quaternary (or information or knowledge) sector.

Service as Part of the Experience Economy Pine and Gilmore (1999) have popularised a key idea in service management; that advanced economies are now experience economies. Using three sectors of the economy outlined in the previous subchapter – primary, secondary, tertiary – services are the next ‘stage’ in economic development.

1st Stage is less developed economies, which rely on the extraction of value mainly in the form of minerals. 2nd Stage is when economies become more reliant on manufacturing as they industrialize. 3rd Stage is when economies advance to offering services such as retail. 4th Stage economies advance to a phase, Pine & Gilmore call the ‘Experience economy'. An experience economy relates to a phase of economic development typical of the 1990s which saw value associated with products and services become connected to the effect they can have on people’s lives, e.g. their symbolic meanings rather than the actual process or thing. For example, Pine and Gilmore (1998) set out how theatrical and entertainment experiences are moving beyond and out of their traditional home in theme parks into restaurants (eater-tainment – e.g. restaurant where you catch a fish and they cook it for you), retail (retail-tainment), and into all sorts of services one wouldn't expect to see entertainment (e.g. even hospitals). This idea – that all services need to think like entertainment companies such as Walt Disney, or Netflix – is still pervasive and powerful in service business strategy (even tertiary education in a University). Pine and Gilmore suggest the development of the experience economy is evolutionary, so the experience economy is more ‘advanced’ than service, industrial and primary economies. However, in reality, all of these phases co-exist in different combinations (e.g. sometimes also called dual economies).

Service Type

* Public Services = Government *Voluntary Services overlap with NFP and include services such as hospice.

Types of Process Another useful categorisation scheme is to distinguish between the type of service that the organisation is delivering. For instance, commodity, capability, complexity, and simplicity processes. A similar scheme is mass, professional, and shop processes (Fitzsimmons & Fitzsimmons, 2004).

Commodity processes are characterised by their high volume and low variety. They are also called mass services. For instance, a budget hotel provides a commodity process because each interaction with the customer is almost the same (low process variety at check-in) and they do a lot of them (high volume). Capability processes have high process variety and low volume, meaning each time a process is done it might be quite different from the one conducted before it and there are not so many of them. For instance, a typical capability process is provided by a professional consultant. Capability processes are also called professional services. Complexity processes offer high volume and high variety. These processes are also called shop services. Complexity services could include your local car mechanic shop. They may have a high volume of customers, but each customer’s vehicle presents a different challenge for the mechanic shop meaning process variety is high. Simplicity processes have low volume and low variety. They tend to not generate as much profit for a business because they do not have the economies of scale available to mass or commodity services. Consequently, simplicity processes can usually be found in places like boutique breweries that do not intend to grow, or they are used as incubators when larger services experiment with changes to their existing service provision. McDonald’s’ Cafes started out as incubators before they became a core service of McDonald’s. Categorizing services by type can be useful as the management challenges and techniques used in one type of process are similar. Understanding one service means techniques of management can be transferred to another service in the same category. This means, if you have managed a mass service, such as a fast-food service, you will have relevant experience to manage another mass

service like a vehicle testing facility. If you’ve managed a theme park or a hotel, you have the knowledge and skills to transfer to the management of a cruise ship service.

Summary What are services? ● Services are provided by a variety of types of organisations, including business-to-consumer services (B2C), business-to-business services (B2B), internal services, public services, and not-forprofit and voluntary services.

What is ‘service’? ● A service is an activity – a process or set of steps (unlike a product which is a thing) – which involves the treatment of a customer (or user) or something belonging to them, where the customer is also involved, and performs some role (co-production), in the service process. ● From the operation’s point of view, the service provided is the service process and its outputs which have been designed, created and enacted by the operation using its many input resources, including the customer, where the customer also takes some part in the service process. ● From the customer’s perspective, the service received is the customer’s experience of the service provided and their interaction with it, perceptions of it, and response to it, which results in outcomes such as ‘products’, benefits, emotions, judgements and intentions

What is service operations management? ● Service operations management is concerned with the activities, decisions, and responsibilities of operations managers in service organisations. It entails providing services, and value, to customers or users, ensuring they get the right experiences and the desired outcomes. It involves understanding the needs of the customers, managing the service processes, ensuring the organisation’s objectives are met, while also paying attention to the continual improvement of the services.

Why is service operations management important? ● Service operations managers  are responsible for a large proportion of the organisation’s assets  are responsible for delivering service to the organisation’s customers  have a significant impact on the success of an organisation. ● Good service operations management, resulting in good services and experiences, will deliver the ‘triple bottom line’, i.e.  better for the customer  better for the staff  better for the organisation. ● At a macro level services are a critical part of most economies, accounting for a significant proportion of GDP and employment.

Week 2: The World of Service Overview

Challenges of Service Management

Unique Characteristics of Services

Summary What are the key strategic challenges faced by service operations managers? ● Managing tactically and strategically ● Making operations a contributor to strategy as well as an implementer ● Making the business case for service ● Understanding the service concept.

What are the key tactical challenges faced by service operations managers? ● Understanding the customer perspective ● Managing multiple customers ● Managing the customer ● Managing in real time ● Co-ordinating different parts of the organisation ● Encouraging improvement and innovation.

What are the challenges for different types of services? There are 5 broad sectors of the service economy: 1. business-to-business services 2. business-to-consumer services 3. internal services 4. public services

5. not-for-profit services.

The key challenges are:     

B2B – providing high-quality services to business customers who frequently have high purchasing power B2C – providing consistent service to a wide variety and high volume of customers internal services – demonstrating value for money against possible external alternatives public services (G2C) – balancing the various political pressures and providing acceptable public services not-for-profit services – dealing with differences between volunteers, donors, and beneficiaries.

What are the challenges for different types of process? There are four main types of service processes: 1. capability 2. commodity 3. simplicity 4. complexity

A key challenge for service operations managers is to ensure that the type of process is appropriate to deliver the service concept.

What are the challenges in working with other management functions? ● Too much focus on the day-to-day ● Lack of strategic influence ● Limited focus on innovation ● Difculty of making the business case.

Week 3: This week we look at both service strategy and the service concept. You need to understand what a service concept is and how to use it for the successful completion of Assessments 2 and 3. Service strategy and the service concept are closely interlinked, and we explore why and how this week.

What is service strategy? Service strategy is concerned with how an organisation shapes the direction and development of its service-providing resources and processes. To do this, a service strategy (like any functional strategy, or contributor to business strategy) should do four things: 1. 2. 3. 4.

Reflect the overall strategic aims of the business. Satisfy the requirements of the market(s) that the business serves. Consider the practicalities of how a service can be delivered. Develop the capabilities of the organisation’s service resources and processes.

Each of these is an important constituent part of a service strategy, and worth examining in a little more detail. However, each is only a part of a firm’s service strategy. For a service strategy to be effective, all four must be addressed.

1. Reflect the overall strategic aims of the business. The corporate strategy will consist of decisions about what types of business the group wants to be in, in what parts of the world it wants to operate, what businesses to acquire and what to divest, how to allocate its cash between its various businesses and so on. Within a corporate group, each business unit will also need to put together its own business strategy that will set out its individual mission and objectives as well as defining how it intends to compete in its markets. Similarly, within the business, each part will need to consider how it should contribute to the strategic and/ or competitive objectives of the business as a whole and guide its actions within the business. This is sometimes called the ‘top-down’ view of strategy.

2. Satisfy the requirements of the market(s) that the business serves. Understanding markets is usually thought of as the exclusive domain of the marketing function, whose specialists employ tools and techniques designed to access customer and consumer opinions and preferences. The main approach it uses to do this is ‘market segmentation’ – primarily a way of understanding markets so as to match a company’s marketing efforts to Its customers’ requirements. The marketing function approaches this task by viewing heterogeneous markets as a collection of smaller, more homogeneous, markets Yet, the nature of service organisations means that their service-providing resources are intimately involved with the organisations’ customers. - customers are clearly influenced in how they judge an organisation’s services by how they view that organisation’s competitors. Therefore, the nature and influence of markets and customers cannot be regarded as simply an issue for marketing. - It is not good practice for any type of company to confine its understanding of markets to the marketing function. But for service companies it is particularly harmful. - Ensuring that service strategy takes market requirements into account is sometimes called the ‘outside-in’ view of strategy.

3. Consider the practicalities of how a servi...